Page last updated at 02:45 GMT, Saturday, 9 January 2010

Venezuela will slash value of currency, the bolivar

President Hugo Chavez, in front of a portrait of Simon Bolivar
Chavez said the devaluation would limit unnecessary imports

Venezuela's President Hugo Chavez has announced that the national currency, the bolivar, will be devalued for the first time since 2005, by at least 17%.

The bolivar, whose rate is set by government decree, will be devalued from its current rate of 2.15 to the US dollar to 2.60 for "priority" imports.

However, the bolivar will be worth 4.30 to the dollar, a 50% devaluation, for items considered non-essential.

Mr Chavez was under pressure to devalue to boost revenue from oil exports.

The country is currently facing 25% inflation, as well as reduced foreign earnings.

However, the bolivar is far more devalued on the parallel, unofficial currency market where it trades at rates as high as six bolivars to a US dollar.

Food and health care imports, and the public sector will be able to take advantage of the lower of the two official rates.

However, cars, chemicals, petrochemical and electronics will be charged at the higher rate.

President Chavez said that the two official rates would have the effect of "limiting imports that are not strictly necessary and stimulating export policy".

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